Lou Cannon: Obamacare Due for More Trouble as Health-Care Issues Dominate State Politics

Obamacare remains an untidy work in progress in the states, which are struggling with Medicaid expansion, website problems and insurance issues in an election year in which health care policy is overshadowed by partisan politics.

“It’s the most partisan issue I’ve seen in my 20 years at the NCSL,” Storey said.

Nearly four years after Obamacare’s passage and two years after the U.S. Supreme Court upheld the constitutionality of most of its provisions, Republicans — emboldened by public skepticism — continue to resist implementation of the complex law.

The law is intended to provide affordable care for the uninsured, requiring individuals who do not sign up for a health-care policy to pay a penalty of $95 or 1 percent of their income, whichever is greater.

A majority of Americans disapprove of the penalty and indeed of the law itself. The latest Gallup survey, taken in the first week of January, found that 54 percent of Americans disapprove of Obamacare and that only 38 percent support it.

Medicaid, the valuable ugly duckling of health care, has proved especially vexing. Obamacare expanded Medicaid from a program that provided health care for the poor and disabled into a broad-based program that covers anyone with income up to 138 percent of the poverty line — individuals making less than $15,856 a year or a family of four earning less than $32,499. The law also extended Medicaid to childless adults, who were previously excluded from coverage.

Even without the health-care law, Medicaid is a big deal, enrolling more people than Medicare, the program that provides health care for those 65 and over. According to the Kaiser Health Foundation, more than 51 million people used Medicaid during 2013, including 31 million children. Medicaid finances 40 percent of all births in the United States and is the largest source of coverage for those with HIV and AIDS.

As the law was written, states were required to undertake the Medicaid expansion. The federal government offered states a carrot of paying the entire cost of newly eligible Medicaid enrollees for three years. They also displayed a stick: states that did not expand would be denied federal Medicaid funds. The Supreme Court decision otherwise upholding Obamacare removed the stick, allowing states to refrain from expansion without penalty.

Twenty-five states, mostly under Democratic control, and the District of Columbia agreed to expand Medicaid. Most of the Republican-controlled states originally rejected expansion, but a number of GOP governors have had second thoughts, in some cases prodded by hospital associations that didn’t want their states to walk away from millions of dollars of federal money.

Republican governors in seven states — Arizona, Michigan, Nevada, New Jersey, New Mexico, North Dakota and Ohio — have signed on for Medicaid expansion, often over the objections of GOP-controlled legislatures.

Officials in two other Republican-run states, Pennsylvania and Tennessee, have explored a “private option” with the Health and Human Services Department as an alternative to expanding Medicaid. These states hope to use federal Medicaid dollars to help people purchase private insurance on the online exchanges that are a central feature of Obamacare. HHS last year allowed Arkansas and Iowa to do this but warned it would not necessarily grant similar permission to every state.

Other Republican governors, such as Rick Perry of Texas, remain opposed to Medicaid expansion. They say states won’t have enough money to pay for expansion when the federal government gradually reduces its share of payments to 90 percent, starting in 2017. Even though this sounds generous, states would still have to come up with millions of dollars as their share of Medicaid expansion.

But expanding Medicaid is not without complications for the Democratic-controlled states that willingly agreed to it. A little-discussed provision of the health-care law provides full federal funding only for persons newly eligible for Medicaid coverage.

The heavy publicity given Obamacare has created what Pattison refers to as a “woodwork effect,” signing up thousands of people who were previously eligible for Medicaid coverage but didn’t realize it. States will receive their normal federal share of federal funding for these Medicaid enrollees. The federal share under a complicated formula ranges from 55.8 percent in New Jersey to 80.4 percent in Mississippi, and nationally averages 63.7 percent.

The woodwork effect is likely to be most pronounced and the costs highest in states that have promoted the new exchanges and made a concerted attempt to expand Medicaid without worrying about whether those who enroll are newly eligible. Three states — California, New York and Washington — account for roughly a third of the Medicaid signups. Washington state, with a far smaller population than California and New York, accounted for the most Medicaid signups: 214,485. No data is yet available on how many of these enrollees are newly eligible.

Enrollment for insurance coverage under the health-care law began Oct. 1 on 13 state-run exchanges and the federal website, healthcare.gov, in states that do not operate their own exchanges. Anyone with income between 138 percent above the poverty line — the Medicaid cutoff — and 400 percent above the poverty line is eligible for subsidized insurance coverage on one of the exchanges.

But in large part because the federal website suffered a nightmare rollout, with breakdowns and long delays, enrollment for insurance coverage has lagged. In the last three months of 2013, nearly 2.2 million Americans signed up for private health-care coverage and nearly 1.6 million signed up for Medicaid or the related Children’s Health Insurance Program (CHIP). Covered California, the sophisticated California exchange, has enrolled more than a half-million people in private insurance plans, about a quarter of the national total.

The jury is still out on the success of Obamacare, including Medicaid expansion. Insurance premiums are almost certain to soar unless the new law enrolls sufficient young and healthy people to pay the higher insurance costs of older and potentially less healthy Americans.

The early numbers were not encouraging. Of those who signed up for health insurance during the first three months of the exchanges, 55 percent are age 45 to 64 and only 24 percent 18 to 34 years old.

Obama administration officials remain optimistic, however, pointing out that when Massachusetts rolled out a mandated health insurance plan in 2006, many young people waited until the deadline to sign up. The deadline for obtaining health insurance without penalty under Obamacare is March 31.

Even enthusiastic supporters of Obamacare acknowledge that the law may need some tweaking to improve its performance. But as Storey observes, it’s going to be difficult to make any changes in the law when it’s being used as “a wedge issue by both sides” in the 2014 elections. Republicans control a near-record number of legislative chambers as well as the House of Representatives and have hopes — for the third election in a row — of winning the U.S. Senate.

In their campaigns against Obamacare, which many Republicans still want repealed, GOP politicians cite cost uncertainties and President Barack Obama’s broken promise that people would be allowed to keep their old insurance policies if they wanted to do so. Democrats emphasize that the law for the first time enables everyone to obtain insurance coverage, regardless of their medical history. But mindful of the polls, many Democrats try to avoid discussion of the law, preferring to stress economic issues such as an increase in the minimum wage.

Fierce controversies attended Social Security (1935) and Medicare (1965) before they became woven into the fabric of American society, but both these programs were created by bipartisan congressional coalitions. In contrast, the Patient Protection and Affordable Care Act passed by Democrats on a party-line vote in 2010 and has been a bone of partisan contention ever since. Medicaid came into existence at the same time as Medicare, also with bipartisan support, but required state implementation. Some states held out for years; Arizona becoming the last state to implement a Medicaid program in 1982.

Obamacare also faces a long battle for acceptance. Its survival depends on whether enough young people enroll to keep insurance premiums affordable and on how voters respond to this wedge issue in the 2014 elections.

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